City of Lexington v. Lexington Leader Co.

• Citation: 235 S.W. 31,193 Ky. 107
• Parties: CITY OF LEXINGTON v. LEXINGTON LEADER CO.
• Decision Date: 02 December 1921
• Court: Court of Appeals of Kentucky

235 S.W. 31

193 Ky. 107

CITY OF LEXINGTON v. LEXINGTON LEADER CO.

Court of Appeals of Kentucky.

December 2, 1921

Appeal from Circuit Court, Fayette County.

Action by the Lexington Leader Company against the City of Lexington. Judgment for plaintiff, and defendant appeals. Reversed, with directions.

James A. Wilmore, of Lexington, for appellant.

Richard C. Stoll, of Lexington, for appellee.

THOMAS J.

By this action, filed by appellee and plaintiff below, Lexington Leader Company, a corporation, against the city of Lexington plaintiff seeks exemption from municipal taxation upon its machinery, paper, and other material used in publishing and issuing its newspaper in the city, called the Lexington Leader, for the years 1917, 1918, and 1919. The right to the relief is claimed under exemption (2) of section 4019a10 vol. 3, present Kentucky Statutes, which is part of an act of the General Assembly passed at a special session on May 2 1917. The section provides that all property subject to taxation for state purposes shall likewise be subject to local taxation "in the county, city, school or other taxing district in which same has a taxable situs," except three named classes, which shall be exempt from location taxation and subject to taxation for state purposes only. Exemption (2) from municipal taxation excludes:

"Machinery and products in course of manufacture of persons, firms or corporations actually engaged in manufacturing and their raw material actually on hand at their plants for the purpose of manufacture."

In an effort to give force to the contention that plaintiff is "engaged in manufacturing," and therefore entitled to the exemption within the contemplation of the statute, the petition goes into great detail in stating the various kinds of machinery employed in issuing the newspaper, and in explaining how the lead or type metal is melted and impressed with lettering through the manipulations of the linotype machine, and how the type or lettering so produced is transferred by stereotyping machines to matrices, from which are made metallic plates containing the words and sentences to appear in the newspaper. It is further explained how the metal plates are operated so as to stamp the printing upon the blank paper, and it is contended that these various manipulations, alterations, and processes make the final product, the newspaper, a "manufactured" article, and classifies plaintiff in issuing its newspaper as one "actually engaged in manufacturing," so as to exempt it from taxation on any of its property or material thus employed. The city demurred to the petition, which the court overruled, and, it declining to plead further, judgment was rendered enjoining it from collecting any of the taxes involved for either of the years mentioned upon any of the property so employed; and, complaining of that judgment, it prosecutes this appeal.

It will at once be seen that the question is whether a newspaper is such an article of manufacture as renders its publisher "engaged in manufacturing," as contemplated by the exemption under consideration. The words "manufacture," "manufacturing," "manufacturing establishment," and correlated expressions, are extremely difficult, if not impossible, of exact legal definition. Etymologically, according to Webster, the word "manufacture" means:

"The process or operation of making wares or any material products by hand, by machinery, or by other agency; often, such process or operation carried on systematically with division of labor and with the use of machinery. Anything made from raw materials by the hand, by machinery, or by art, as cloths, iron utensils, shoes, machinery, saddlery, etc. A manufactory; a factory."

This definition, as will be seen, is general, and is broad enough to include every process or operation by which something is added to or taken from an article, which in its changed form is adapted to a different use and purpose than was the original article before any alterations were made. It will thus be seen that but little advancement is made toward discovering a legal definition from the literary one given by Mr. Webster, which, after all, is no more satisfactory from a legal standpoint than are the lexicographical definitions of "fraud," "accident," "conspiracy," and similar subjects with which the law has to deal.

It has therefore come to pass that courts, in determining the meaning of the words "manufacture," "manufacturing," and "manufacturing establishments," are largely governed by the circumstances surrounding the cases in which they are used, and by the intent and purpose of the Legislature in enacting the particular statute wherein they are found, which results in construing the words as meaning one thing in a particular statute and entirely a different thing in another one, dependent, as indicated, upon the intention and the purpose in enacting the statute and the end intended to be accomplished thereby. Usually that meaning will be attached to them which corresponds with "the common understanding of mankind," in view of the subject-matter in connection with which they are used. In other words, that interpretation is to be adopted which agrees with the popular sense in which they are used and understood, rather than according to their scientific meaning; and this is especially so in the construction of tax laws including exemptions therefrom. In re Capital Publishing Co., 3 McArthur (D. C.) 405; State Evening Journal Ass'n, etc., v. State Board, 47 N. J. Law, 36, 54 Am.Rep. 114; Press Printing Co. v. State Board of Assessors, 51 N. J. Law, 75, 16 A. 173; Dolese & S. Co. v. O'Connell, 257 Ill. 43, 100 N.E. 235; Williams v. Park, 72 N.H. 305, 56 A. 463, 64 L.R.A. 33; People ex rel. New England Dressed Meat & Wool Co. v. Roberts, 155 N.Y. 688, 50 N.E. 1120, 41 L.R.A. 228; State v. American Sugar Refining Co., 108 La. 603, 32 So. 965; Standard Tailoring Co. v. City of Louisville, 152 Ky. 504, 153 S.W. 764, 44 L.R.A. (N. S.) 303, Ann.Cas. 1915B, 220, and annotations to City of Louisville v. Zinmeister & Sons, 188 Ky. 570, 222 S.W. 958, reported in 10 A.L.R. 1269, the annotations being on pages 1274-1276, inclusive.

In the Standard Tailoring Co. Case, from this court, which was one wherein a tailoring establishment sought the same exemption from local taxation on the same grounds as here involved, but which was denied, the opinion, inter alia, says:

"The words 'manufacturing establishment' have been given a variety of meanings, depending largely on the circumstances surrounding the case in which they have been used. The result of this is that although the words have been often defined by the courts, few judicial precedents can be found that may be properly applied to any particular state of facts." The opinion continues by giving the definition of Mr. Webster, supra, and then says:

"But, in applying it to the facts of particular cases in which the construction of ordinances or statutes were involved, the courts, especially in license and exemption cases, have found it necessary, in carrying out the legislative intent in the use of the word, to materially limit the scope of this general definition, which is broad enough to embrace almost every concern that is engaged in the business of changing the nature or quality of articles so that they may be used for whatever purpose they were intended. Indeed, we might say that the meaning of the words 'manufacture' and 'manufacturing establishment' has been adapted to meet the varying circumstances arising in the case or class of cases in which it was necessary to define them, so that the intent with which they were used might be accomplished. The purpose of the lawmaking body in using the words has always been allowed to have controlling weight in the decision of the meaning that should be attached to them, as may be seen by an examination of the number of cases cited in Words and Phrases, vol. 5, title 'Manufacture.' "

Following these rules, courts are more inclined to attach a broader meaning to the terms "manufacture" and "manufacturing establishments" in mechanic's lien laws (an example of which is the case of Bogard v. Tyler, 119 Ky. 637, 55 S.W. 709, 21 Ky. Law Rep. 1452), workmen's compensation acts, and other similar statutes wherein they are used, in order to effectuate the sound public policy embodied therein, and presumed beneficent purposes of such statutes, while in tax exemption statutes a more restricted definition will be adhered to, since they are to be strictly construed. Notes to City of Louisville v. Zinmeister & Sons, supra, in 10 A.L.R. 1274; City of Middlesboro v. New Southern Brewing & Ice Co., 108 Ky. 351, 56 S.W. 427, 21 Ky. Law Rep. 1782; Jones Bros. v. City of Louisville, 142 Ky. 759, 135 S.W. 301; Louisville & Nashville Railroad Co. v. City of Louisville, 143 Ky. 258, 136 S.W. 611; Victor Cotton Oil Co. v. City of Louisville, 149 Ky. 149, 148 S.W. 10; and Standard Tailoring Co. v. City of Louisville, supra, which is reported in 152 Ky. 504, 153 S.W. 764, 44 L.R.A. (N. S.) 303, and Ann.Cas. 1915B, 220.

The cases cited adopt and reiterate the rule substantially the same as it is stated in annotations in 10 A.L.R. 1274, thus:

"Laws granting tax exemptions to manufacturing companies, because in derogation of common right, are not so favorably regarded by the courts as to justify an interpretation that would extend their meaning by mere implication. In other words, tax exemptions, like other cases of special privileges, are to be strictly construed."

That statement of the rule is supported by a reference to the Kentucky cases, supra, and many others from other states. So that the rule with...